Candlestick Pattern: A Guide to the 20 Most Important Patterns Traders Must Know

Candlestick History and Philosophy

Candlestick charts were born in Japan in the 18th century, developed by Munehisa Homma, a rice trader from Sakata who managed to build an extraordinary fortune through revolutionary price analysis methods. This method was then introduced to the Western world by Steve Nison through his book "Japanese Candlestick Charting Techniques" in 1991.

The philosophy behind candlesticks is that markets are driven by human emotions — fear and greed. Each candlestick tells the "story" of the battle between buyers (bulls) and sellers (bears) in a certain time period.

Anatomy of a Candlestick

Each candlestick consists of:

• Body (Real Body) — The main part of the candlestick that shows the distance between the open and close prices


• Upper Shadow (Upper Wick) — The thin line above the body that shows the highest price in the period


• Lower Shadow (Lower Wick) — Thin line under the body that shows the lowest price


• Body Color — Green/white for bullish (close > open), red/black for bearish (close < open)

Single Candlestick Pattern (One Candle)

1. Doji

Doji is formed when the open and close prices are almost the same, resulting in a very small or even non-existent body. Doji reflects market uncertainty — no one is in control between buyers and sellers. There are several types of Doji:

• Standard Doji — Upper and lower shadows are balanced, indicating pure indecision


• Long-legged Doji — Very long shadow, high volatility but ends with no clear direction


• Gravestone Doji — Long shadow above, minimal shadow below — bearish reversal signal


• Dragonfly Doji — Long shadow below, no upper shadow — bullish reversal signal

2. Hammer and Hanging Man

Hammer appears at the end of a downtrend with a small body at the top and a lower shadow of at least 2x the length of the body. This indicates buyers are starting to take control — a strong bullish reversal signal. Confirmation should ideally be the next bullish candle.

Hanging Man has an identical shape to Hammer but appears at the peak of an uptrend. Even though buyers dominated, sellers managed to push prices back down — a warning that the uptrend might reverse.

3. Shooting Star and Inverted Hammer

Shooting Star comes at the end of an uptrend with a long shadow above and a small body below. This shows that buyers had pushed the price very high but sellers managed to seize control — a valid bearish reversal signal.

Inverted Hammer is identical in shape but appears after a downtrend — a potential bullish reversal signal, although it requires stronger confirmation.

4. Marubozu

Marubozu is a candlestick with a long body without a shadow (or very minimal shadow). Bullish Marubozu indicates total buyer dominance, while Bearish Marubozu indicates complete control by sellers. This is one of the strongest trend signals in candlestick analysis.

5. Spinning Top

Spinning top has a small body with relatively long upper and lower shadows. Reflects market uncertainty and consolidation — price moves in both directions but ends close to opening price.

Two Candle Candlestick Pattern

6. Bullish Engulfing

One of the most powerful reversal patterns. Consists of a small bearish candle followed by a large bullish candle that "engulfs" the entire body of the previous candle. Appearing at the end of a downtrend, this is a strong signal that buyers have taken control of the market.

7. Bearish Engulfing

The opposite of Bullish Engulfing. A small bullish candle is followed by a large bearish candle that swallows the entire previous body. Appears at the top of an uptrend as a signal of a downward reversal.

8. Bullish Harami

Harami comes from Japanese which means "pregnant". This pattern consists of a large bearish candle (mother) followed by a small bullish candle (baby) that is completely within the body range of the previous candle. Appears after a downtrend as a potential reversal signal.

9. Bearish Harami

A large bullish candle is followed by a small bearish candle contained in the body of the first candle. Appears after an uptrend, indicating buying momentum is starting to weaken.

10. Tweezer Top and Tweezer Bottom

Tweezer Top consists of two candles with the same high appearing at the top of an uptrend — a strong resistance level. Tweezer Bottom on the other hand, two candles with the same low below a downtrend — a strong support level.

11. Dark Cloud Cover

A large bullish candle is followed by a bearish candle that opens above the previous high but closes above the middle of the first candle's body. Moderate bearish reversal signal, requires confirmation.

12. Piercing Line

The opposite of Dark Cloud Cover. A large bearish candle is followed by a bullish candle that opens below the previous low but closes above the middle of the first candle's body. Bullish reversal signal.

Three Candle Candlestick Pattern

13. Morning Star

A three candle pattern consisting of: (1) A large bearish candle, (2) A small candle (can be Doji) which shows uncertainty with a gap, (3) A large bullish candle which covers more than 50% of the loss of the first candle. Morning Star is the strongest bullish reversal signal in candlestick analysis.

14. Evening Star

The opposite of the Morning Star — a very strong bearish reversal signal. Consists of a large bullish candle, a small candle at the top, and a bearish candle that closes more than 50% of the first candle's rise.

15. Three White Soldiers

Three consecutive bullish candles with long bodies, each opening within the body of the previous candle and closing near its high. A strong signal that a strong uptrend is starting or continuing.

16. Three Black Crows

Three consecutive bearish candles with a long body — a signal that a strong decline is occurring or is about to occur. Appears after a period of increases as confirmation of a trend reversal.

17. Three Inside Up and Three Inside Down

Confirmation version of the Harami pattern. Three Inside Up (bullish reversal): Big bearish, small bullish inside, then big bullish close above the first candle. Three Inside Down is the opposite.

18. Abandoned Baby

A rare but very powerful pattern. Consists of three candles with gaps on either side of the middle candle (usually Doji). Bullish Abandoned Baby appears after a downtrend — a very strong reversal signal.

19. Upside Tasuki Gap and Downside Tasuki Gap

Unique continuation pattern. Upside Tasuki Gap: two bullish candles with a gap between them, followed by a bearish candle that fails to completely fill the gap — the uptrend will continue. The downside of Tasuki Gap is the opposite.

20. Kicker Pattern

One of the most powerful signals in all candlestick analysis. Two candles in opposite directions with a gap between them. Bullish Kicker: a bearish candle immediately followed by a bullish candle that opens with a gap above — a drastic and rapid change in market sentiment.

Tips for Using Candlestick Patterns Effectively

• Always confirm — Don't enter a position based on just one pattern without confirmation from the next candle or another indicator


• Pay attention to context — Patterns in support/resistance areas are much more significant than in the middle of the range


• Body and shadow size — The longer the body or shadow, the stronger the signal


• Volume as confirmation — Patterns with high volume are more reliable


• Higher time frame — Patterns on H4 and D1 are more powerful than M15 or M30

Remember: No candlestick pattern has 100% accuracy. Every signal is just a probability, not a certainty. Always use stop losses and strict risk management.